OMAN - The Upstream Element.

On Oct. 22, 1996, the government and the partners in Oman LNG had signed two agreements for related upstream development projects. Under one agreement, PDO undertook to develop the gas reserves and build the upstream element on behalf of the state. Upstream work included drilling for and production and transportation of the gas by pipeline from the fields in central Oman to the liquefaction plant and to new industrial ventures to be built at Sur.

The second agreement covered the government's sales of the natural gas feed to the LNG plant and a pledge by Oman LNG's foreign partners to arrange $1.4 bn in financing for the upstream element. The government was to reimburse Oman LNG's foreign partners from 2001 to 2006, out of revenues from sales of gas to the joint venture's liquefaction plant as well condensates associated with the gas.

PDO is owned by the government (60%), Shell (34%), TotalFinaElf (4%) and Partex (2%). Under the first agreement, PDO was to manage for 25 years the upstream projects and supplies of natural gas to the LNG plant as well as to industries and an electric power plant to be built in Sur. The latter projects do not involve Oman LNG (see detailed background in Vol. 54).

Initially, the government had dedicated 7 TCF of their proven reserves for the LNG project. But when Oman LNG decided to scale the downstream project up to 6.6m t/y, the volume of dedicated reserves was raised to 8.4 TCF, with the venture to receive 880 MCF/day (up from the original 775 MCF/day target) for a period of 25yyears from late 1999.

All the upstream projects were executed according to plan and were completed in late 1999. The pipeline to Sur and Qalhat, about 400 km, has the capacity to supply both the LNG plant and a set of industries to be built at Sur. These will include an ammonia/urea complex being a JV between Oman Oil Co. and Indian companies (see Downstream Trends No. 6).

The fields producing the gas are Saih Nihayda, Saih Rawl and Barik in central Oman. Development drilling there began in the first half of 1997. The fields came on stream before end-1999 (see their profiles in Gas Market Trends No. 6).

The third train will require a further development of the fields under a $250m project. Work on this began in late 2001 as PDO, after dividing the project into three separate packages, finalised the list of companies to bid for the EPC contracts. The first package entails adding 20 MCM/d of new gas treatment capacity at Saih Nihayda, with the option to install a gas-gathering network for 10 MCM/d. The second involves installing well-head compression facilities at Yibal. The third, covering the pipelines, centres on a 48-inch pipe to run from the field to Sur and a gas booster station to be built. The EPC contracts will be awarded in the second half of 2002, when Oman LNG will have secured buyers for the third train.